Mr. Brundage: Most casual dining stocks have, until the last month or two, performed fairly well. The QSR (quick service restaurant) area has been more of a mixed bag; McDonald's (MCD) has had a difficult year but TRICON (YUM) and Wendy's (WEN) have performed well.
TWST: What has been driving the performance of the casual dining stocks?
Mr. Brundage: Investors, in my opinion, have been using a lot of these
names as safe havens. With the collapse in the technology sector,
investors have focused on companies with somewhat more stable business
models. One portfolio manager with whom I spoke recently and who has
largely agreed with our cautious stance on casual dining, but who still
owns a fair number of casual dining stocks, summed it up this way: 'I
don't mind if a casual dining stock misses its numbers by a penny or two
since I've recently owned stuff that has missed by a buck.' The theory
has been that even if the economy does slow a bit, people are still
going to continue to eat out. And until recently, the same-store sales
growth numbers generally have been strong. However, during the last
month or two, comps have begun to weaken across the sector.
Tickers included in this excerpt: DRI, EAT, MCD, OSI, WEN, YUM
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.